The rising prevalence of type 2 diabetes mellitus (T2DM) in obese children, particularly in minority ethnic groups, is an enormous public health problem. The early age of onset of T2DM in youth may particularly increase the risk of devastating complications which are known to be directly related to the degree and duration of hyperglycemia. There is strong evidence from studies in adults (UKPDS) that normalization of glucose greatly decreases the frequency of microvascular complications of T2DM. It is, therefore, imperative to aggressively treat T2DM in order to reach long-term glycemic control in youths. The UKPDS also showed that life style intervention or monotherapy with insulin or metformin alone is usually insufficient to maintain long-term diabetes control. We, hereby, propose to test the hypothesis that the combined use of therapeutic agents that reverses or improves insulin resistance and restores first phase insulin secretion VS monotherapy with metformin alone will serve to preserve B-cell function in youth with new onset T2DM and increase the likelihood of achieving and maintaining strict metabolic control of diabetes. We seek to serve for a clinical site for a multi center trial site for the treatment of T2DM in children and adolescents of different ethnic groups. At randomization patients will be allocated to 4 treatment strategies: 1) metformin alone; 2) metformin plus inhaled insulin; 3) metformin plus nateglinide and 4) piozlitazone plus metformin. The primary efficacy aim is: To examine and compare the effects of the treatments on overall diabetes control, as assessed by sequential HbA1c level less than or equal to 7.0 percent. Furthermore, to determine differences in the ability of treatments regimens to achieve and maintain target HbA1c levels less than or equal to 7 percent. Secondary efficacy aims: To examine and compare the effects of the treatment on macrovascular risk factors (lipid profiles, post-prandial hyperglycemia etc.); preservation of B-cell function as assessed by the C-peptide stimulation test; development and progression of microvascular complications and psychosocial well being. Safety aims are hypoglycemia; accelerated weight gain and known potential adverse effects of pharmacological agents. To accomplish these goals and to best perform as a clinical site in the multi center treatment trial of T2DM in youth, we have brought together a team of researchers with expertise in childhood obesity, T1 and T2DM in youth, pharmacological studies in children (Pediatric Pharmacology Research Unit, PPRU) and community based interventions.